Google Profit Jumps 61%; Plans New Stock Class

Internet giant Google Inc. (GOOG: Quote) said Thursday after the markets closed that its first quarter profit rose 61% from last year, helped by strong demand for its search advertising. The company's quarterly earnings per share, excluding items, also breezed past Wall Street expectations.

Additionally, the company announced plans to create a new class of non-voting capital stock, which will be distributed through a stock dividend to all existing shareholders. Holder of each existing share will receive one new share of the non-voting stock, which will be listed on Nasdaq.

In a letter, Google chief executive officer Larry Page described the creation of the non-voting stock class as "effectively a two-for-one stock split—something many of our investors have long asked us for."
"These non-voting shares will be available for corporate uses, like equity-based employee compensation, that might otherwise dilute our governance structure," he added.

The company's board of directors has approved the proposal, which is subject to the approval of a majority of the voting power of Google's common stock, voting together as a single class, at the company's annual meeting on June 21.

Mountain View, California-based Google said total advertising revenues for the first quarter rose 23% from a year ago to $10.2 billion and constituted 97% of total revenue.

Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of the company's AdSense partners, increased about 39% over the first quarter of 2011.

However, average cost-per-click, which includes clicks related to ads served on Google sites and the sites of AdSense partners, fell about 12% from last year. This marks the second consecutive quarter in which average cost-per-click has declined year-over-year.

Analysts view the decrease in CPC as a result of increased clicking by consumers on ads found on smartphones and tablets.

"Google had another great quarter with revenues up 24% year on year," said Page. "We also saw tremendous momentum from the big bets we've made in products like Android, Chrome and YouTube. We are still at the very early stages of what technology can do to improve people's lives and we have enormous opportunities ahead. It is a very exciting time to be at Google."

Google shares are currently gaining 0.24% in after hours trading after closing the day's regular trading session at $651.01, up $15.05 or 2.37%. the shares trade in a 52-week range of $473.02 to $670.25.

For the first quarter ended March 31, 2012, Google reported net income of $2.89 billion or $8.75 per share, compared to $1.80 billion or $5.51 per share for the year-ago quarter.

Excluding items, adjusted net income for the first quarter was $3.33 billion or $10.08 per share, compared to $2.64 billion or $8.08 per share in the prior year quarter.

On average, 37 analysts polled by Thomson Reuters expected the company to earn $9.65 per share for the first quarter. Analysts' estimates typically exclude special items.

Operating margin for the first quarter improved to 32% from 27% a year earlier, while adjusted operating for the quarter decreased to 37% from 38% last year.

Google, owner of Internet's most popular search engine, said revenues for the first quarter rose 24% to $10.65 billion from $8.58 billion in the same quarter last year.

Excluding Traffic Acquisition Costs, the portion of revenues Google shared with its partners, first quarter revenues surged 24% to $8.14 billion from $6.54 billion a year ago. Twenty-two analysts had a consensus revenue estimate of $8.15 billion for the first quarter.

Revenues from Google-owned sites were up by 24% to $7.31 billion in the first quarter, while Google's partner sites generated revenues, through AdSense programs, of $291 billion, up 20% from a year earlier.

First quarter revenues from outside of the United States were $5.77 billion, representing 54% of total revenues in the quarter, compared to 53% in the year-ago quarter.

Google ended the first quarter with cash, cash equivalents, and short-term marketable securities of $49.3 billion, compared to $42.6 billion at the end of the previous quarter.

Google, which continues to dominate the Internet search market, is diversifying into other areas outside its traditional search business. Last year, the company launched its social networking site Google+ as part of its efforts to challenge Facebook. The company is also in the process of acquiring Motorola Mobility Holdings, Inc. (MMI) in a $12.5 billion deal.